Salam dear Mark,
Thank you for your question.
Issues related to the Hereafter belong to the realm of the Unseen. Therefore, it is beyond our ordinary means of cognition and reasoning.
We are not advised to speculate about the nature of the Hereafter.
Regarding The Death of Children
Children are a gift from Allah, the Almighty, and we have to thank Allah day and night for this gift. Children are the joy of our life.
The death of children is also a test from Allah. We read in the Quran what means:
And We will surely test you with something of fear and hunger and a loss of wealth and lives and fruits, but give good tidings to the patient. (Quran 2:155)
We have to be patient when we are tested with the death of our children. Patient people get unlimited reward from Allah.
Allah says what means:
Indeed, the patient will be given their reward without account. (Quran 39:10)
The Prophet (peace be upon him) said:
When a person’s child dies, Allah says to His angels, ‘You have taken the child of My slave.’ They say, ‘Yes.’ He says, ‘You have taken the apple of his eye.’ They say, ‘Yes.’ He says, ‘What did My slave say?’ They say, ‘He praised you and said “Innaa lillaahi wa inna ilayhi raaji`un (Verily to Allah we belong and unto Him is our return).’ Allah says, ‘Build for My slave a house in Paradise and call it the house of praise.’ (At-Tirmidhi)
Children in the Afterlife
As for the issue of the fate of the children who die before reaching the age of puberty, we have to differentiate between the fate of Muslim children and the fate of children whose parents were not Muslims.
Regarding the fate of Muslim children, our scholars agree that they will be among the people of Paradise.
But as for the fate of the children whose parents are not Muslims, this is a controversial issue.
Children of Non-Muslims
The Majority of scholars view that they will go to Paradise.
In contrast, some of them say that they will be in al-A`raf [a place between Paradise and Hell], but then they will be in Paradise because this is the ultimate destiny of the people of Al-A`raf.
But, the Prophet (peace be upon him) saw the children of the Muslims and the children of the believers with Ibrahim (peace be upon him) in Paradise (Found in al-Bukhaari, 6640).
The Prophet (peace be upon him) was asked about the children of the non-believers, and he said,
“Allah knows best what they would have done.” (Al-Bukhari)
Opposite this, there is another group which maintained that the children of the non-Muslim parents will be the servants of the people of Paradise. Ibn Taymiyyah said that this view has no basis.
This refutes the point you mentioned in your question, dear Mark, that they will be turned into houris or servants.
Some scholars view that those children will be tested in the Hereafter, and whoever obeys Allah will enter Paradise, and whoever disobeys Him will enter Hell.
Children Will Be Rewarded for Good Deeds
With regard to whether children will get rewarded for their good deeds, the majority of scholars maintain that they will be rewarded for their good deeds and their bad deeds will be left off.
It is reported that Ibn `Abbas said:
“A woman lifted up a child and said, ‘O Messenger of Allah, will his Hajj be counted?’ He said, ‘Yes, and you will be rewarded.’” (Muslim)
Imam Ibn Rushd said:
“The bad deeds of young children are not recorded but their good deeds will be recorded, according to the sound opinion.”
We hope this answers your question. Yet, we have noticed that you seem to often ask questions whose answers will not get you closer to God (Allah).